What is the Competition Market for Uber? An Empirical
Assessment in Taiwan
Hung-Hao Chang
Ridesharing
companies such as Uber are examples of companies taking advantage of advanced
digital technology to disrupt the traditional transportation market. Uber, the most
successful ride sharing economy business model, was launched in San Francisco city
in U.S. in 2009, and it has expanded to many major countries worldwide. Registered
as a technology company that manages a ridesharing platform to connect service
providers and consumers, Uber uses a mobile application to match passengers with
drivers of private vehicles through the application of an internet platform. Because
Uber does not own its vehicles but only works with privately licensed drivers,
Uber claims itself as a platform matchmaker rather than a transport provider. Uber
drivers therefore do not have to comply with transportation and communication laws
which are applied to taxi drivers.
Severe protests
from taxi drivers against Uber have been found in many countries. Taxi drivers
claim that Uber’s service is unregulated and uses potentially dangerous vehicles
and untested private drivers to operate. Taxi drivers have urged the government
to take legal action on Uber to avoid the unfair competition between Uber and
taxi companies. Two interesting questions are then raised: (1) Does Uber
compete with taxicabs in the same market? If not, there is no ground for taxi drivers
to complain about. (2) Should Uber be regulated in the same way as taxis? From
the view of competition laws, the answers of these two questions are closely
relevant to an appropriate definition of a competition market for Uber.
Although market definition is a longstanding research topic in antitrust
analysis, defining a competition market for Uber is not obvious since it is
registered as an IT company.
An empirical
analysis was recently completed to address the above policy issues by assessing
the impacts of Uber on taxi drivers’ economic outcomes and business strategies
in Taiwan. The theoretical framework of this study is based on the theory of harm.
If the presence of Uber affects taxi drivers, then Uber and taxi industry
should be defined in the same competition market. Given that Uber entered
Taipei city of Taiwan in 2013, this study examines the effect of Uber on taxi
industry by comparing the performance of taxi drivers in Taipei City and the
ones in other cities before and after the presence of Uber. Using a solid
econometric analysis on a population-based survey of taxi drivers, it was found
that Uber significantly reduced the service revenue and profit margin of taxi
drivers who are the members of a taxi motorcade. In esponse to competition from
Uber, it was also found that taxi drivers in Taipei City were more likely to
adopt advertisements in or on their taxicabs compared to taxi drivers in other
cities without Uber service. Additionally, there was a lower incidence rate of
car accidents among taxi drivers in Taipei City, which may indicate that taxi drivers
are providing better ride service as a strategy to cope with the competitive pressure
from Uber.
To sum, a
negative impact of Uber on taxi drivers' service revenue may suggest a substitution
between Uber service and taxi operation. Taxi motorcades are directly competing
with Uber which is because both taxi motorcades and Uber use a dispatching
system in business operation. Accordingly, this study suggests that Uber probably
has to be considered in the same competition market as the one with taxi motorcades.
The above post
draws on material discussed at greater length in “The Economic Effects of Uber
on Taxi Drivers in Taiwan”, recently published in volume 13, issue 3 of the Journal
of Competition Law and Economics.
The author is a commissioner of the Taiwan
Fair Trade Commission (TFTC), and a professor at the National Taiwan
University. The view of the paper is on the author, but not the TFTC. E-mail:
hunghaochang@ntu.edu.tw
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